Definition
An investment fund that pools money from many investors to purchase a diversified mix of stocks, bonds, or other securities.
What to consider
- Look at the fund’s focus to see if it matches your goals.
- Check fees and performance to ensure value over time.
- Diversification within the fund can help reduce risk.
Real world scenarios
- Brianna picks a balanced mutual fund containing both stocks and bonds, preferring this diversified approach to individual stock picks.
- By automatically reinvesting dividends, Neal sees compound growth in his mutual fund over several years.
- During a market downturn, Stacy’s mutual fund absorbs less impact thanks to its broad mix of different companies.
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